Large-scale Urban Interventions: The Case of Faria Lima in Sao Paulo

Large-scale urban redevelopment projects (termed grandes projectos urbanos or GPUs in Spanish) raise many questions about the impacts of subsequent urban development induced by the intervention. GPUs are characterized by an impact in a significant part of the city, often with the use of some new fiscal or regulatory instruments and the involvement of a large network of agents and institutions. These projects are expected to affect land prices, recycle existing or create new infrastructure and facilities, and attract other new buildings.

GPUs as an urban policy instrument have been the object of considerable controversy and debate throughout Latin America. It is often argued that they promote social exclusion and gentrification, have limited effects in stimulating real estate activities, and require large (sometimes hidden) public subsidies that often draw fiscal resources from other urban needs. In spite of their increasing popularity in Latin America, there is little empirical evidence to support these criticisms.

This article presents the case of a GPU introduced in São Paulo, Brazil, in 1996 as an "urban operation" to redevelop a middle-income area of mostly single-family homes that was to be traversed by the extension of the Faria Lima Avenue. The project is known as the Faria Lima Urban Operation Consortium (OUCFL). We examine economic principles that affect the fiscal performance of the project and its opportunity for value capture, evaluate changes in residential density, and analyze changes in income distribution and ownership structure. Finally, we offer some policy suggestions on how and when to use this kind of instrument based on these assessments.